Half-yearly Report

Date : 04/20/2012 @ 10:38AM
Source : UK Regulatory (RNS & others)
Stock : Chelverton (CGW)
Quote : 63.5  0.0 (0.00%) @ 1:30AM
Chelverton share price Chart

Half-yearly Report

Half Yearly Report 
for the six months ended 29 February 2012 
Investment objective 
The Company's objective is to provide capital growth through investment in 
companies listed on the Official List and traded on the Alternative Investment 
Market ("AIM") with a market capitalisation at the time of investment of up to 
GBP50 million, which are believed to be at a "point of change". The Company will 
also invest in unquoted investments where it is believed that there is a 
likelihood of the shares becoming listed or traded on AIM or the investee 
company being sold. Its investment objective is to increase net asset value per 
share at a higher rate than other quoted smaller company trusts and the FTSE 
All-Share Index. 
Investment policy 
The Company invests principally in securities of publicly quoted UK companies, 
though it may invest in unquoted securities. The concentrated UK portfolio 
comprises between 20 to 35 securities. The performance of the Company's 
investments is compared to the FTSE All-Share Index. 
The Company will also invest in unquoted investments where it is believed that 
there is a likelihood of the shares becoming listed or traded on AIM or the 
investee company being sold. 
It is the Company's policy not to invest in any listed investment companies or 
listed investment trusts. 
It is intended from time to time, when deemed appropriate, that the Company 
will borrow for investment purposes. The Company, however, does not currently 
have any borrowing facilities. 
Investment strategy 
Investments are selected for the portfolio only after extensive research which 
the Investment Manager believes to be key. The whole process through which 
equity must pass in order to be included in the portfolio is very rigorous. 
Only a security where the Investment Manager believes that the price will be 
significantly higher in the future will pass the selection process. The 
Company's Investment Manager believes the key to successful stock selection is 
to identify the long-term value of a company's shares and to have the patience 
to hold the shares until that value is appreciated by other investors. 
Identifying long-term value involves detailed analysis of a company's earning 
prospects over a five year time horizon. 
The Company's Investment Manager is Chelverton Asset Management Limited, an 
independent investment manager focusing exclusively on achieving returns for 
investors based on UK investment analysis of the highest quality. The founders 
and employee owners of Chelverton include experienced investment professionals 
with strong investment performance records who believe rigorous fundamental 
research allied to patience is the basis of long-term investment success. 
Interim management report 
The Company's net asset value per share has increased in the last six months 
from 30.60p to 33.53p, an increase of 9.6%.  In the same period the Company's 
benchmark index, the FTSE All-Share, increased by some 8.7 %. 
In the last few months of 2011 UK investors took an increasingly risk averse 
attitude which was reflected in the strong relative performance of the 
"Mega-Capitalised" defensive companies and the consequent underperformance of 
smaller companies.  At the macro level this was driven by the continued 
problems within the Eurozone and was not helped at home by the Chancellor's 
downbeat Autumn Statement.  At the same time, the earnings forecasts for 
companies were being reduced as the combined effects of an economic slowdown 
and overly optimistic market expectations took their toll. 
The start of 2012 however, saw a reversal of this trend as small and middle 
sized companies outperformed when investors switched into a 'risk on' mode 
against a background of improving data from the US and hopes of a soft landing 
in China, although the Eurozone remained a cause of concern. 
The busy corporate reporting season has helped to underpin current valuations 
across the market and many companies have continued to generate cash and pay 
dividends in excess of forecasts.  In our Company we have recently seen 
positive contract announcements from IDOX and Belgravium, and a good set of 
results from Titan Europe.  PSG Solutions has also performed particularly well 
as the re-rating continued in the wake of its interim results. 
Elsewhere in the fund, the shares in Sanderson responded strongly to the 
announcement that it was to sell its subsidiary that provides EPOS solutions to 
high street retailers, representing 40% of the business, for GBP11.5m cash, the 
equivalent of the market capitalisation at the time.  Quindell Portfolio 
acquired a 29.9% stake in AI Claims after a share swap with a number of major 
shareholders and has now made a cash offer for the balance. 
We have made a new investment in a start up company, Transflex, a van leasing 
business with a highly experienced management team, while Parmenion, another 
unquoted investment, continued to trade well.  We raised funds in the period 
from the sale of part of our holdings in Alliance Pharma and IDOX and by the 
sale of all of the shareholding in Pennant International. In part, these monies 
were used to finance the successful tender offer. 
Looking through to the second half of the year the global macro outlook is 
improving, led by the US, and there is a growing feeling that we may be past 
the worst in respect of the domestic public finances.  This has however already 
been reflected in an upturn in investor sentiment, but we need to see 
increasing corporate profitability to move the market forward. Realistically we 
are still looking to 2013 for an improvement in the domestic sectors such as 
contracting and retailing. 
Encouragingly, the ratio of company upgrades to downgrades has turned positive 
and we look to this to provide underlying momentum to share prices.  Our short 
term fear is that this recent improvement translates into unrealistic 
expectations and it is hoped that realism will hold back some of the more 
bullish estimates. 
As a footnote, we are delighted to announce that your Company received the best 
performing fund award for 2011 at the recent PLC awards. 
Chelverton Asset Management Limited 
20 April 2012 
Principal risks and uncertainties 
The Board considers that the principal risks and uncertainties facing the 
Company for the remaining six months of the financial year remain the same as 
those disclosed in the Interim management report above and also on pages 11 and 
12 of the Report of the Directors in the Annual Report for the year ended 31 
August 2011.  These risks include market risk, discount volatility, regulatory 
risks, financial risk and liquidity risks. 
Responsibility statement 
The Directors confirm that to the best of their knowledge: 
? the condensed set of financial statements for the six months to 29 February 
2012, prepared in accordance with the Statement on Half Yearly Financial 
Reports issued by the UK Accounting Standards Board, gives a true and fair view 
of the assets, liabilities, financial position and net return of the Company; 
? the interim management report together with the notes to the Half Yearly 
Report include a fair review of the information required by; 
a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of 
important events that have occurred during the first six months of the 
financial year and their impact on the condensed set of financial statements; 
and a description of the principal risks and uncertainties for the remaining 
six months of the year; and 
b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party 
transactions that have taken place in the first six months of the current 
financial year and that have materially affected the financial position or 
performance of the Company during that period; and any changes in the related 
party transactions described in the last Annual Report that could do so. 
This Half Yearly Report was approved by the Board of Directors on 20 April 2012 
and the above responsibility statement was signed on its behalf by George 
Stevens, Chairman. 
Going Concern 
The Directors believe, bearing in mind the nature of the Company's business and 
assets, that the Company has adequate resources to continue in operational 
existence for the foreseeable future.  For this reason they continue to adopt 
the going concern basis in preparing the accounts. 
Portfolio review 
as at 29 February 2012 
The Company's portfolio as at 29 February 2012 is set out below. 
                                                                                     Valuation  % of 
Investment                               Sector                                          GBP'000 total 
AIM traded 
AI Claims Solutions                      Non Life Insurance                                475  11.9 
The provision of non-fault accident management services 
Alliance Pharma                          Pharmaceuticals & Biotechnology                   259   6.5 
Acquisition of the manufacturing, sales and distribution rights to 
Belgravium Technologies                  Technology Hardware & Equipment                   375   9.4 
Software systems for warehousing and distribution 
CEPS                                     Support Services                                  200   5.0 
Production and supply of components for the footwear industry; personal 
protection equipment; production of printed lycra fabric; and services to the 
mail industry 
Datong Electronics                       Electronic & Electrical Equipment                  52   1.3 
Develops, manages and supplies covert tracking and surveillance systems 
IDOX                                     Software & Computer Services                    1,174  29.4 
Software company specialising in the development of products for document and 
information management 
LPA Group                                Electronic & Electrical Equipment                 112   2.8 
Design, manufacture and marketing of industrial electrical accessories 
MTI Wireless Edge                        Technology Hardware & Equipment                    63   1.6 
Developer and manufacturer of sophisticated antennas and antenna systems 
Northbridge Industrial Services          Industrial Engineering                            128   3.2 
Consolidation vehicle for specialist industrial services in the UK 
Pennant International Group              Support Services                                   13   0.3 
Development, provision and maintenance of advanced security systems and 
related services 
PSG Solutions                            Support Services                                  144   3.6 
Leading provider of Local Authority residential property searches; provision of 
packaging solutions and technical surveillance countermeasures components 
Richoux Group                            Travel & Leisure                                   39   1.0 
Owner and operator of Richoux Restaurants 
Sanderson Group                          Software & Computer Services                      111   2.8 
Provides software and IT services 
Titan Europe                             Industrial Engineering                            138   3.4 
Manufacture of big wheels for construction, mining and agricultural vehicles 
Tristel                                  Health Care Equipment & Services                  144   3.6 
Healthcare business specialising in infection control in hospitals 
Universe Group                           Support Services                                   10   0.2 
Provision of credit card fraud prevention system, loyalty systems and retail 
One Horizon Group 
(formerly Satcom Group)                  Mobile Telecommunications                          59   1.5 
Provider of mobile satellite communications equipment and airtime 
Closed Loop Recycling                    Support Services 
Loanstock                                                                                    0   0.0 
Ordinary B shares                                                                            0   0.0 
Operation of a plastic recycling plant 
Parmenion Capital Partners LLP           Support Services                                  398  10.0 
Provides fund-based discretionary fund management services to Independent 
Financial Advisors 
Transflex Vehicle Rental Limited         Support Services                                  100   2.5 
Light commercial vehicle rental business 
Portfolio valuation                                                                      3,994 100.0 
Portfolio of investments 
                                       29 February 2012    31 August 2011 
                                       Valuation   % of  Valuation   % of 
Investment                                 GBP'000  total      GBP'000  total 
IDOX                                       1,174   29.4      1,153   28.4 
AI Claims Solutions                          475   11.9        570   14.1 
Parmenion Capital Partners LLP               398   10.0        436   10.8 
Belgravium Technologies                      375    9.4        312    7.7 
Alliance Pharma                              259    6.5        264    6.5 
CEPS                                         200    5.0        260    6.4 
PSG Solutions                                144    3.6        114    2.8 
Tristel                                      144    3.6        160    3.9 
Titan Europe                                 138    3.4        124    3.1 
Northbridge Industrial Services              128    3.2        132    3.3 
LPA Group                                    112    2.8         78    1.9 
Sanderson Group                              111    2.8         99    2.4 
Transflex Vehicle Rental Limited             100    2.5          -      - 
MTI Wireless Edge                             63    1.6         60    1.5 
One Horizon Group                             59    1.5         32    0.8 
Datong Electronics                             52    1.3         62    1.5 
Richoux Group                                 39    1.0         49    1.2 
Pennant International Group                   13    0.3         11    0.3 
Universe Group                                10    0.2         10    0.2 
Total                                      3,994  100.0      3,926   96.8 
The investment in Closed Loop Recycling shown within the portfolio review has 
not been shown above as it has no value. 
Portfolio breakdown by sector and by index 
as at 29 February 2012 
Percentage of portfolio by sector 
Sector                            Percentage 
Software & Computer Services            32.2 
Support Services                        21.6 
Non Life Insurance                      11.9 
Technology Hardware & Equipment         11.0 
Industrial Engineering                   6.6 
Pharmaceuticals & Biotechnology          6.5 
Electronic & Electrical Equipment        4.1 
Health Care Equipment & Services         3.6 
Mobile Telecommunications                1.5 
Travel & Leisure                         1.0 
Percentage of portfolio by index 
Index     Percentage 
AIM             86.0 
Unquoted        12.5 
Delisted         1.5 
Income statement (unaudited) 
for the six months to 29 February 2012 
                               Six months to             Year  to            Six months to 
                              29 February 2012        31 August 2011        28 February 2011 
                           Revenue Capital  Total Revenue Capital  Total Revenue Capital  Total 
                             GBP'000   GBP'000  GBP'000   GBP'000   GBP'000  GBP'000   GBP'000   GBP'000  GBP'000 
Gains on 
investments at 
fair value                       -     352    352       -     913    913       -     798    798 
Income                          38       -     38      77       -     77      20       -     20 
fee*                            (5)    (15)   (20)    (10)    (31)   (41)     (5)    (15)   (20) 
Other expenses                 (28)      -    (28)   (136)      -   (136)    (71)      -    (71) 
Net return on 
activities before 
taxation                         5     337    342     (69)    882    813     (56)    783    727 
Taxation on 
ordinary activities              -       -      -       -       -      -       -       -      - 
Net return on 
activities after 
taxation                         5     337    342     (69)    882    813     (56)    783    727 
                           Revenue Capital  Total Revenue Capital  Total Revenue Capital  Total 
                             pence   pence  pence   pence   pence  pence   pence   pence  pence 
Return per Ordinary share#    0.04    2.60   2.64   (0.50)   6.42   5.92   (0.39)   5.46   5.07 
* 75% of the management fee and finance costs have been charged to capital 
# The return per Ordinary share is based on 12,951,672 (31 August 2011: 
13,742,414; 28 February 2011: 14,325,621) shares, being the weighted average 
number of shares in issue during the period. 
The total column of this statement is the profit and loss account of the 
All revenue and capital items in the above statement derive from continuing 
A separate statement of total recognised gains and losses has not been prepared 
as all such gains and losses are included in the income statement. 
Reconciliation of movements in shareholders' funds(unaudited) 
for the six months to 29 February 2012 
                                                   Share            Capital 
                                           Share premium Capital redemption Revenue 
                                         capital account reserve    reserve reserve  Total 
                                           GBP'000   GBP'000   GBP'000      GBP'000   GBP'000  GBP'000 
Six months to 29 February 2012 
1 September 2011                             132   2,674  (1,857)        57   3,043  4,049 
Cost of shares purchased for 
cancellation under the tender offer 
and buyback offer                            (13)      -       -         13    (406)  (406) 
Net return after taxation for the 
period                                         -       -     337          -       5    342 
29 February 2012                             119   2,674  (1,520)        70   2,642  3,985 
Year to 31 August 2011 
1 September 2010                             149   2,674  (2,739)        40   3,506  3,630 
Cost of shares purchased for 
cancellation under tender offer              (15)      -       -         15    (394)  (394) 
Shares cancelled from Treasury                (2)      -       -          2       -      - 
Net return after taxation for the year         -       -     882          -     (69)   813 
31 August 2011                               132   2,674  (1,857)        57   3,043  4,049 
Six months to 28 February 2011 
1 September 2010                             149   2,674  (2,739)        40   3,506  3,630 
Cost of shares purchased for 
cancellation under tender offer              (15)      -       -         15    (394)  (394) 
Net return after taxation for the 
period                                         -       -     783          -     (56)   727 
28 February 2011                             134   2,674  (1,956)        55   3,056  3,963 
Balance sheet(unaudited) 
as at 29 February 2012 
                                                           As at          As at            As at 
                                                29 February 2012 31 August 2011 28 February 2011 
                                                           GBP'000          GBP'000            GBP'000 
Fixed assets 
    Investments at fair value                              3,994          4,055            3,898 
Current assets 
    Debtors                                                    7              9                5 
    Cash at bank                                              32             30               94 
                                                              39             39               99 
Creditors - amounts falling due within one year 
    Creditors                                                 48             45               34 
                                                              48             45               34 
Net current (liabilities)/ assets                             (9)            (6)              65 
Net assets                                                 3,985          4,049            3,963 
Share capital and reserves 
    Share capital                                            119            132              134 
    Share premium account                                  2,674          2,674            2,674 
    Capital reserve                                       (1,520)        (1,857)          (1,956) 
    Capital redemption reserve                                70             57               55 
    Revenue reserve                                        2,642          3,043            3,056 
Equity shareholders' funds                                 3,985          4,049            3,963 
Net asset value per Ordinary share (note 1)                33.53p         30.60p           29.95p 
Statement of cash flows(unaudited) 
for the six months to 29 February 2012 
                                              Six months to        Year to    Six months to 
                                           29 February 2012 31 August 2011 28 February 2011 
                                                      GBP'000          GBP'000            GBP'000 
Operating activities 
Investment income received                               32             76               20 
Interest income received                                  6              -                - 
Investment management fees paid                         (20)           (41)             (20) 
Secretarial fees paid                                   (20)           (46)             (23) 
Other cash payments                                     (14)           (92)             (58) 
Net cash outflow from operating 
activities (note 3)                                     (16)          (103)             (81) 
Investing activities 
Purchases of investments                               (100)          (156)             (21) 
Sales of investments                                    513            597              504 
Net cash inflow from investing activities               413            441              483 
Cost of shares purchased for cancellation 
under tender offer and buyback offer                   (395)          (394)            (394) 
Net cash outflow from financing activities             (395)          (394)            (394) 
Increase/(decrease) in cash                               2            (56)               8 
Notes to the half yearly report 
The unaudited interim financial information does not constitute statutory 
accounts as defined in Section 434 of the Companies Act 2006. The statutory 
accounts for the year to 31 August 2011, which contained an unqualified 
auditors' report, have been lodged with the Registrar of Companies and did not 
contain a statement required under Section 498 (2) or (3) of the Companies Act 
2006. The financial information for the period ended 29 February 2012 and 28 
February 2011 has not been audited or reviewed by the Company's Auditor 
pursuant to the Auditing Practices Board guidance on such reviews. 
This information has been prepared on the basis of accounting policies set out 
in the statutory accounts of the Company for the year to 31 August 2011. 
1 Net asset value 
The basic net asset value per Ordinary share is based on net assets of GBP 
3,985,000 (31 August 2011: GBP4,049,000; 28 February 2011: GBP3,963,000) and on 
11,884,283 Ordinary shares (31 August 2011: 13,233,344; 28 February 2011: 
13,233,344) being the number of Ordinary shares in issue at the period end. 
2 Taxation 
The tax charge for the six months to 29 February 2012 is nil (year to 31 August 
2011: nil; six months to 28 February 2011: nil). 
The Company has an effective tax rate of 0% for the year ending 31 August 2012. 
The estimated effective tax rate is 0% as investment gains are exempt from tax 
owing to the Company's status as an Investment Trust and there is expected to 
be an excess of management expenses over taxable income. 
3 Reconciliation of net return before finance costs and taxation to net cash 
outflow from operating activities 
                                       Six months to        Year to    Six months to 
                                    29 February 2012 31 August 2011 28 February 2011 
                                               GBP'000          GBP'000            GBP'000 
Net return before finance costs and 
taxation                                         342            813              727 
Net capital return before finance 
costs                                           (337)          (882)            (783) 
Expenses charged to capital                      (15)           (31)             (15) 
Decrease in creditors and accruals                (8)             -              (11) 
Decrease/(increase) in prepayments 
and accrued income                                 2             (3)               1 
Net cash outflow from operating 
activities                                       (16)          (103)             (81) 
4 Called up share capital 
Pursuant to the Tender Offer, 1,323,334 Ordinary shares and to the buyback 
offer, 25,727 Ordinary shares were repurchased for cancellation on 23 January 
2012.  Following the Tender Offer and buyback offer there are 11,884,283 
Ordinary shares in issue (31 August 2011:13,233,344: 28 February 2011: 
5 Related party transactions 
Chelverton Asset Management Limited acts as the Investment Manager. Mr Horner, 
a Director of the Company, is also a director of Chelverton Asset Management 
Limited. He is also a director of CEPS PLC, in which the Company has an 
investment. At 29 February 2012 there was GBP3,000 (31 August 2011: GBP3,000, 28 
February 2011: GBP3,000) payable to the Investment Manager. 
6 Status of Company 
It is the intention of the Directors to conduct the affairs of the Company so 
that they satisfy the conditions for approval as an investment trust company as 
set out in Sections 1158/1159 of the Corporation Tax Act 2010. 
Directors and advisers 
George Stevens (Chairman) 
Kevin Allen 
David Horner 
Investment Manager 
Chelverton Asset Management Limited 
12b George Street, 
Bath BA1 2EH 
Tel: 01225 483 030 
Secretary and Registered Office 
Capita Sinclair Henderson Limited 
(trading as Capita Financial Group - 
Specialist Fund Services) 
Beaufort House 
51 New North Road 
Exeter EX4 4EP 
Tel: 01392 412 122 
Registrar and Transfer Office 
Share Registrars Limited 
Suite E 
First Floor 
9 Lion and Lamb Yard 
Surrey GU9 7LL 
Tel: 01252 821 390 
Hazlewoods LLP 
Windsor House 
Bayshill Road 
Cheltenham GL50 3AT 
Custodian and Banker 
HSBC Investment Bank plc 
Level 29 
8 Canada Square 
London E14 5HQ 
The Company's shares are quoted daily in the Financial Times under 'Investment 
Companies'. Information about the Company can be obtained at the Investment 
Manager's website at www.chelvertonam.com. 
An investment company as defined under Section 833 of the Companies Act 2006. 
Neither the contents of the Company's website nor the contents of any website 
accessible from hyperlinks on this announcement (or any other website) is 
incorporated into, or forms part of, this announcement. 

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